Background Press Call on Global Transportation Supply Chain Bottlenecks

Via Teleconference

6:33 P.M. EDT

MS. SIMONS: Good evening, everyone. Thank you for joining us for this embargoed background briefing.

On this call, senior administration officials will provide an overview of the collective efforts to address global transportation supply chain bottlenecks. We will take questions at the end.

While this call is on background, just for your awareness, the speakers on the call this evening are [senior administration official] and [senior administration official].

As a reminder, this briefing is on background, attributable to "senior administration officials," and it is embargoed until 5:00 a.m. tomorrow morning.

You will also receive an embargoed factsheet outlining the actions that have been discussed on this call. With that, I'll now turn it over to [senior administration official].

SENIOR ADMINISTRATION OFFICIAL: Good evening, everybody. Thank you for joining us.

I'm going to start by talking a little bit about the economy and sort of setting the stage for this conversation about supply chains.

First and foremost, I think it's important to recognize that we're seeing a very strong recovery as a result of the President's Rescue Plan that supported hardworking American families and businesses, and the measures on COVID that are making people feel safer about going back to work and going shopping.

We've created 600,000 jobs per month during this administration. The unemployment rate is down. Growth is outpacing prior forecasts. Wages are also up. All of this is very good news.

But, of course, in the recovery from the pandemic, there have been a lot of fits and starts, particularly around our supply chains. We've seen a number of disruptions that we are facing today.

The first point to make about this is that this is really being driven a lot by increased demand. And during the pandemic, of course, people shifted their expenditures from services to more durable goods, as they repaired homes and purchased a lot of entertainment and leisure activities as well.

And as a result, what we've seen is an enormous demand for goods through our supply chain transportation system. A lot of this was due to pushing purchases more online, which has bigger implications, of course, for importing and for warehousing and other factors along our supply chain, and this has put a lot of strain across the system.

If we look just at the U.S. ports that have -- across the country -- we're seeing a record inbound throughput this year -- up about 18 percent. And specifically, in the ports of LA and Long Beach, which represent 40 percent of all containers that enter into the country, we've seen a record 30 percent increase on import and export containers in the first six months of this year, compared to last year. And in Long Beach, a 23 percent increase.

We've also seen this across our rails and trucking systems as well. So, an enormous amount of increased throughput in our supplies chain, which has put, of course, obvious strains on the system.

But this is not just a story of domestic demand; it's also got a global dimension. And this is a global challenge -- a once-in-a-century pandemic that has disrupted ports and logistics systems around the world.

We know key ports abroad have shut down for weeks due to COVID, as well as factories producing goods for the U.S.

And, of course, this has been -- part of the administration's goal is to really try and help mitigate the impacts of COVID globally. And we've continued our vaccine campaign not just in this country, but around the world. And if we can stabilize the pandemic, we know it will have a positive impact on global supply chains and benefit the global economy as well as this economy.

The U.S. has donated more than 40 million COVID-19 vaccine doses across Southeast Asia, where we have seen a lot of the outbreak in terms of COVID and disruptions both in ports as well as in manufacturing. And we're also taking a lot of actions to bolster vaccine production at home and across the world, including through tech transfer in the Southeast Asia.

Finally, the U.S. has immunized 54,000 international shipping workers who have been working tirelessly, as we know, for months, sometimes years, on these -- on the ships. And this has really helped the global shipping industry continue to operate during these challenging times.

But, of course, ordinary people and businesses are feeling the effects of these delays and bottlenecks. It makes it challenging to get products on the shelves and for goods to be delivered to their doorstep.

Importantly, I think it -- we should set the frame for this discussion, perhaps beginning on day one with this administration in which resilient supply chains have been the number one priority.

In February, as many of you know, the President issued an executive order for agencies across the federal government to review weaknesses in supply chains in critical products and industries.

In June, he subsequently created the White House Supply Chains Task Force -- led by Secretaries Buttigieg, Raimondo, and Vilsack -- to address bottlenecks and disruptions across these critical products and industries. And, of course, Secretary Buttigieg has been leading the task force, focused particularly on transportation and logistics.

In addition, the President also issued an EO on competition and called for strengthening the Federal Maritime Commission and ensuring -- to ensure that there's fair and competitive practices in the shipping industry.

And finally, in August, the President brought -- perhaps not arguably -- but arguably the most qualified person in this country to help us face these challenges and bring his expertise to the problems at hand, and appointed John Porcari as our Port Envoy.

So, at this point, let me hand over to [senior administration official] to discuss recent work and the steps we are taking going forward.

SENIOR ADMINISTRATION OFFICIAL: Thanks, [senior administration official]. Appreciate it.

As [senior administration official] mentioned, in the months since the beginning of the task force, we've been hard at work identifying problems and solutions to those problems to accelerate the movement of goods.

Secretary Buttigieg and the DOT staff held convenings with the ports, the trucking industry, labor, retailers -- all parts of the supply chain.

We helped broker an agreement for the Ports of Los Angeles and Long Beach, which, together, handle 40 percent of the container traffic that enters our country to expand hours of operation.

And since then, we've seen a recent announcement from the Port of Los Angeles in much shorter dwell times. That's the time that containers spend not moving.

We're helping to address the truck driver shortage by supporting state DMVs as they return to or even exceed what were their pre-pandemic commercial driver's license issuance rates. In 2021, an average of 50,000 commercial driver's licenses and learner's permits have been issued each month -- 60 percent higher than the 2020 numbers.

And tomorrow, we'll be announcing important news that'll help us to start really address backlogs at the Los Angeles and Long Beach ports.

The Port of Los Angeles is announcing 24/7 service. We have the CEO-level business commitments to back that up. And these commitments are critical. The supply chain is essentially in the hands of the private sector, so we need the private sector to up to help solve these problems.

Tomorrow, three of the largest goods carriers in the country -- Walmart, FedEx, and UPS -- will make commitments toward moving to 24/7, working during off-peak hours.

Just UPS and FedEx alone, combined, shipped 40 percent of American packages by volume in 2020. By taking these steps, they're saying to the rest of the supply chain, "You need to move, too. Let's step it up."

Their efforts and the efforts of others -- Target, Samsung, and Home Depot, among others -- will help us to start address the -- start addressing the backlog. And they pave the way for smaller retailers to also get their goods from a 24/7 model.

Importantly, labor will meet the demands of the 24/7 schedule and be a partner in this effort.

These are major commitments, but they're most effective when every private company along the supply chain does the same thing. And now we're looking to trucking and freight to expand hours as well to help with bottlenecks. Rail freight, in particular, has an important role to play.

To be clear, no matter what we do in the short term, we ultimately have an issue of capacity of our ports, our freight rail, our roads and bridges. Put simply, much of the shipping and freight infrastructure was built decades or even generations ago, and Americans are importing and exporting far more than we did back then.

The federal government will be a strong and willing partner in this effort in the near term, but also in rebuilding a better system for the 21st century.

We'll be working with stakeholders across the supply chain for a 90-day sprint to the end of the year to troubleshoot and alleviate many of the bottlenecks we can quickly address.

We want to engage the states, as well as partners in this effort, and help them improve their freight movement strategies.

The President's bipartisan Infrastructure Investment and Jobs Act is going to help us modernize our shipping infrastructure and expand our capacity.

For the near-term changes that need to happen in private companies, we'll be the honest brokers and partners, and we'll provide carrots and sticks where we can.

Today's commitments are a big deal and will go a long way in addressing short-term challenges. But in the long term, we need to invest in our infrastructure to accommodate the increasing number of goods.

Thanks.

MS. SIMONS: Thank you, [senior administration official] and [senior administration official].

We'll now take a few questions. As a reminder, this call is on background, attributable to "senior administration officials." And to ask a question, please use the "raise hand" function.

All of the questions and answers are embargoed until 5:00 a.m. tomorrow morning, along with the news that was just discussed.

First, we'll go to Chris Megerian from the Los Angeles Times.

Q: Hi, everyone. I have a question. The Port of Los Angeles is going to 24/7, but is Long Beach not? And my follow-up question on that is: Where is the manpower and the funding coming to staff this 24/7? Who will be funding the overtime? You know, where will the people be coming from to, you know, fill those ranks?

SENIOR ADMINISTRATION OFFICIAL: Chris, good question. The Port of Long Beach has already gone to 24/7, and they've been doing that for a little over three weeks now.

So, the Port of Los Angeles is actually meeting that effort, so the combined port complex, which functions as one in terms of its economic impact, is all 24/7.

We should recognize that it takes effort to ramp up to 24/7 operations. But what we have with this announcement is a very strong signal to the rest of the goods movement chain that these ports are open for business, they'll operate around the clock. It's time for the rest of the goods chain to do that.

And when you couple that with the commitments that are made by some of these major businesses to move their cargo off-peak, you start to see that virtuous cycle that builds a 24/7 goods chain.

MS. SIMONS: Thank you.

Q: I'm sorry, I'm not quite sure I understand. Who -- it takes staff to run the ports, obviously. So, where is that staff coming from, and who's going to pick up the bill for the overtime and everything like that?

SENIOR ADMINISTRATION OFFICIAL: The International Longshoremen Workers' Union, the ILWU, has made a commitment that they will be able to staff 24/7.

The port operators -- the terminal operators in the port pay for that labor, and they -- it is up to the terminal operators to actually open up those hours and book the cargo movements in the off hours.

So, labor has pledged that they'll be there. We know that they're committed to doing this, and we know it partially because they worked through the entire pandemic as frontline workers at the loss of a number of ILWU employees.

Q: Thank you.

MS. SIMONS: Thank you, [senior administration official] and Chris.

I also want to mention that [senior administration official], who is [redacted], is joining us for the Q&A as well.

Next, we will have Josh Boak from the AP.

Q: Thanks again for doing this. A really simple question: As of yesterday, LA and Long Beach had 81 ships at anchor and 62 at berth. Where do you expect those numbers to be as this process starts going? What does success look like?

SENIOR ADMINISTRATION OFFICIAL: Well, first, Josh, success is measured by the supply chain moving toward a 24/7 operation. You can't flip a light switch in this very complicated supply chain and have it change overnight, but we're already seeing signs of it. And through the commitments that have been secured from major retailers, for example, that's a strong signal to do it.

And the larger issue is the fluidity and the velocity of the supply chain and making sure that it's fluid in the sense of being able to work 24/7, which includes the entire supply chain -- not just the ports, but the railroads, trucking companies, warehouses, distribution centers, and fulfillment centers.

And with that, we've -- collectively, we can work down that that backlog -- it's important to understand that there's two things going on here: one is the increase in container traffic, which, for the Port of Los Angeles, is over 20 percent above last year; and then the second is the disruption in supply chain.

We -- all of us -- our buying habits are different than they were, and we're buying more products online. We're buying more consumer products in general, especially during the height of the pandemic, and less in the way of other discretionary purchases.

So, those disruptions in the supply don't go away overnight, but opening up night capacity through that entire chain is the fastest way and the most effective long-term way to actually turn it around.

MS. SIMONS: Thank you. Our next question will go to Alex Leary from the Wall Street Journal.

Q: Thank you. Not sure if I can be heard here. But there was a letter --

MS. SIMONS: You can be heard.

Q: Okay, great. Thank you. There was a letter today sent to the administration from the American Association of Port Authorities. One, if you could address that. They're essentially asking if the government can tap the national defense funding to help pay for some of these moves. Is that under consideration? Will we hear some about that tomorrow?

SENIOR ADMINISTRATION OFFICIAL: Well, first, Alex, I think it's worth noting the big part of the American Association of Port Authorities letter, which was their pledge, beyond the Port of Los Angeles and Long Beach, for the major load centers, as they're known -- including Savannah and New York, New Jersey, and others -- to start moving to a 24/7 operation. That's a bold pledge by multiple ports, recognizing that this is probably a long-overdue phenomenon.

So I would say, also: They outlined a number of potential ways that the federal government may be able to assist them. We're evaluating all of them, and all of them are on the table at this point.

MS. SIMONS: Great, thanks. And there's a little feedback on your end. I'm not sure what it is, but just want to flag that.

Okay, next we will do James Politi from the Financial Times.

Q: Hi there. Thanks for this. I was just wondering if you could kind of clarify exactly which companies are making commitments. I know you mentioned Walmart, FedEx, UPS, but also maybe Home Depot and others. Could you clarify which new commitments to move to 24/7 you're seeing, and what was their starting point?

And also, you mentioned sort of carrots and sticks for those who are moving in that direction. What are some of the sticks that you might be considering for those who don't go to 24/7?

SENIOR ADMINISTRATION OFFICIAL: Yeah, thanks for the question, James. So, the first: There'll be more details tomorrow, but I did mention Walmart, FedEx, and UPS with specific commitments moving towards 24/7, and others including Target, Samsung, and Home Depot -- and, we believe, many others to follow -- are either making specific commitments or they are looking at their supply chain right now and determining exactly what kind of commitment they can make.

But these aggregate numbers of these commitments are enough to drive the system towards a 24/7 basis.

And in terms of the carrots that are out there, one example would be in kind of the middle mile of the distribution system, where the freight railroads have the ability to -- through their marketing programs -- to offer off-peak incentives to incentivize night use of ramp capacity.

The same is true of the terminal operators at the ports who are the ones that are actually operating the port on these public lands and they have the ability to financially incentivize night use as well.

We're encouraging all the players throughout the goods movement chain to do exactly that.

Q: Sorry, and the sticks?

SENIOR ADMINISTRATION OFFICIAL: We're very much focused on the carrots at this point. I think what all of the users of the supply chain need to think about is they don't want to be left out. If your competitors can move off-peak more efficiently than you can and with greater velocity, one of the sticks is the market, and I think you need to be responsive to the market.

MS. SIMONS: Okay. Thank you. Next, we will go to Jennifer Epstein from Bloomberg.

Q: Hi. I just wanted to ask about what we can expect from President Biden and the administration tomorrow now that you mentioned that a lot of this has to do with what's coming from the ports and what's coming from companies. And, obviously, you know, what these companies are announcing is in part the result of, I guess, the administration's work with all these companies since the task force was formed.

But are there specific directives that are going to be coming from the President tomorrow or things that he's going to ask companies to do, even if they're not, you know, something in an executive order, for instance?

SENIOR ADMINISTRATION OFFICIAL: Well, Jennifer, I think it's important to first state and make sure everyone understands that this is basically a private sector system -- the goods movement chain. Even the ports are private operators on leased public land, essentially.

And so because it's private sector-driven, one of the most important functions that the federal government can play is the honest broker role and getting different sides together. Over the last several weeks and months -- it started with the work that Secretary Buttigieg undertook -- it was very clear that this was a very siloed goods movement system that often doesn't communicate with each other and talk to each other very well, and does not share data.

So, one of the -- the overall honest broker role in bringing sides together, I think you see evidence of that tomorrow in the commitment of major retailers with specific

volume commitments, and the Port of Los Angeles, to move 24/7.

And bringing those sides together is one important function that the federal government can do in this private sector-driven and private sector-owned system.

MS. SIMONS: Next, we'll go to John Biers from Agence-France Presse.

Q: Thank you. Thank you for taking my question. I'm wondering how much of a difference do you think this will make. One of the things we're hearing a lot about is labor shortages throughout the system, that there's just -- whether it's lack of

truckers or people feeling -- a lack of workers in distribution centers, warehouses, so forth, retailers -- how much of this is -- how much of it this is a problem with that that is just going to be really hard to address in the short run, do you think?

SENIOR ADMINISTRATION OFFICIAL: It's important that the market signal be out there for 24/7. And I previously talked about truck drivers in training and the federal government's work to actually help the states, because licensing is a state process, but help the states accelerate their processes.

There's also a real willingness on the federal government's side, on the training side in general, to help with that.

I think one of the things we're finding in the short term is labor, in particular, has agreed to step up and work additional hours as needed, and step in, in the ports in particular, and do more. That will create more employment opportunities in the future.

And where you have good-paying jobs that you can support family on, I think you'll find that the employees will follow that and it will catch up.

MS. SIMONS: Great. We're going to try and fit in two more questions. Mary Wellons from CNBC.

Q: Hey there. I wondered if you could elaborate a little bit more on what we might see from the trucking industry specifically. And also, you mentioned private sector operators like FedEx and UPS, but you said that you'll be looking to freight and trucking to step up. And what exactly are you hoping to see from those industries?

SENIOR ADMINISTRATION OFFICIAL: We've been working very closely with the trucking industry, both from a national perspective and from a local one -- for example, the Harbor Trucking Association in Los Angeles and Long Beach.

And we have heard loud and clear that, in the short term, anything we can do to improve the quality of the work experience for drivers would be helpful. And the terminal operators at the ports have a big role in that. And again, this kind of (inaudible) an honest broker role, the federal government can help with that as well.

So, while there are no panaceas, there are certainly opportunities -- and we're pursuing all of them -- to make sure that both on the throughput side, where commercial driver's licensing by the states is accelerated. And then making sure on the retention side, doing what's possible to make for a better job experience for drivers is helpful.

One of the advantages of night port operations -- the "night gates," as they're known -- is that the turn time -- how quickly a truck can drop off an empty container, pick up a container and go out, or bring a full agricultural export container for export, drop it off, pick up another one, and go out -- those turn times are significantly faster at night.

So, for drivers who are incentivized by the number of turns, the number of roundtrips that they make, 24/7 operations can actually have a very positive economic impact as well.

MS. SIMONS: And for our final question, we'll go to Jim Tankersley from the New York Times.

Q: Hi, thanks so much. I'm just curious how much you all think the direct payments from the Recovery -- the Rescue Plan are exacerbating these problems by fueling extra demand for goods and by potentially suppressing labor supply via accumulated savings.

SENIOR ADMINISTRATION OFFICIAL: Well, I know [senior administration official] is on the line here and he's far smarter on this than I could ever hope to be.

[Senior administration official]?

SENIOR ADMINISTRATION OFFICIAL: As I joked to you before (inaudible) is that I'm far more foolish to step into these breaches of smart questions that you famously ask.

So, Jim, you know, a couple of thoughts. You know, first, in terms of goods and supply chains, obviously what we're seeing here play out is the global story. You know, that's been true across semiconductors. That's true as we've seen in terms of transportation and logistics. You know, it's been made more complicated by the emergence of the Delta variant.

You know, I think it's also fair to say that we do think there's demand components of this, but, fundamentally, we think that the historic support that the Biden-Harris administration has provided to households and small businesses across the country has, you know, been -- it's been vital. It's part of the reason why the United States is ahead of where it was (inaudible) going to the pandemic, kind of alone among the G7 on that fact.

And so, yeah, there is a demand component that meets supply around supply chains. But, you know, fundamentally, that's a result of the historic support that's been provided. And that has, in turn, allowed the U.S. to have a recovery that's outpaced other developed economy peers.

On the labor supply piece in particular, I think that's a very complicated set of factors that drive that. You know, I think, in general, we think, again, the support that was provided through UI, through direct payments, through a number of other steps was a vital lifeline to families through a very difficult time in the economy.

And to the extent that that's allowing people to be more thoughtful about when and how and for what offer they choose to reconnect to the labor force, that ultimately is very encouraging for the types of wages that people are able to command; I think we've seen evidence of that.

This is also, I think, very hopeful for the long-term kind of matching between individual workers and the right opportunity in the economy, and ultimately is going to be a benefit for the long term -- for the long-term, kind of, health and recovery of the economy post-pandemic.

So those would be my observations on the question you asked.

Q: Thank you.

MS. SIMONS: Thank you, [senior administration officials]. And to all the reporters, thank you for joining us. As a final reminder, this briefing is on background, attributable to "senior administration officials" and embargoed until 5:00 a.m. Eastern tomorrow.

If you didn't have a chance to get your question asked, feel free to shoot me an email and we will do our best to get back to you. And thank you. We hope you all have a great night.

7:04 P.M. EDT